Years before Carl Immich was accused of stealing hundreds of thousands of dollars from the Harriet Tubman Terrace Apartments, six independent audits of the federally subsidized housing complex bore warning signs of financial improprieties.

Documents and correspondence from 2009 to 2014, obtained by Poughkeepsie Journal Freedom of Information Law requests, show a recurring history of unauthorized expenditures and improperly documented payments. But the Tubman Terrace board and the United States Department of Housing and Urban Development, otherwise known as HUD, claim proper oversight was exercised to ensure the financial well-being of the complex.

Those were the years Immich was in charge of the complex's finances.

The question, however, remains: If proper oversight was in place, how did the alleged thefts occur? HUD's oversight and financial controls are not in-depth enough to catch small systematic thefts, one accounting expert told the Journal.

The audits' findings include:

Improper documentation of payments of expenses and travel expenses.

A $25,000 expenditure on a Tenant Appreciation Day that wasn't approved by HUD

An $89,127 payment to entities involved in getting a new HUD-insured loan without balancing the entity's financial ledger.

At least two years of late payments to a contingency account where excess funds were deposited — with $135,403 owed in 2013 and $194,609 owed in October 2014.

There were no findings recorded to date in the most recent 2015 audit. Calls to auditors were not returned.

"HUD was very, very much involved in the financial oversight of the project," said David Wise, attorney for the board, which oversees the nonprofit entity. Wise added there were "frequent exchanges" between the board and HUD regarding finances. "And the board had a number of checks and balances with respect to financial oversight. There was nothing inappropriate on the board's part."​

The two auditors who submitted those reports, Christopher Christopher Gargiulo of Babylon and Matthew Stille of CohnReznick LLP in Atlanta, Georgia, each called for more scrutiny and oversight to ensure the issues did not reoccur. However, details on how that oversight was established by AME Zion Trinity Housing Development Co. — the Tubman Terrace board — remain scant and issues continued to surface.

Immich, 53, allegedly stole hundreds of thousands of dollars by charging on the Tubman credit card, writing checks on the Tubman bank account and padding the payroll to benefit himself and others for more than four years. Immich had authority to write checks for less than $5,000 without approval by board members.

This isn't the first time he's brushed shoulders with the law, either. A Journal investigation in March showed Immich filed for bankruptcy in 2000, had delinquent taxes in 2011 and 2012 and was convicted of first-degree criminal contempt, a felony, in Dutchess County Court in 2011.

A Rhinebeck resident, Immich in February was charged with one count of embezzling government property and one count of theft of property from programs receiving government funds, according to the U.S. Attorney for the Southern District of New York. A March 8 preliminary hearing was adjourned for 30 days. Immich has been out on a $150,000 personal recognizance bond, according to the U.S. Attorney’s Office.

Immich declined to comment for this story, and his Attorney George Edward Fufidio, Jr. did not return calls.

Tubman Terrace is a federally subsidized, 200-unit public housing complex on Jefferson Street in the City of Poughkeepsie. Low-income residents receive reductions on rent via the subsidies.

Tubman Terrace received about $150,000 from HUD per month from 2010 to 2014 to help subsidize rent for the 200-unit complex in the City of Poughkeepsie.

Some local elected officials suggest more scrutiny of affordable housing complexes may be necessary to ensure that issues such as the ones at Tubman Terrace are not repeated. U.S. Rep. Sean Patrick Maloney, D-Cold Spring, said his office has been in touch with HUD and is following the investigation.

“If the allegations are true, and these issues at Harriet Tubman Apartments have persisted for years, then we must re-evaluate the current system of checks and balances, including the amount of HUD oversight on these properties, to ensure instances like these never again slip through the cracks,” he said in an emailed statement.

Federal officials have declined to comment on how the investigation into Immich at Tubman Terrace began. Based on audits, the board was notified of the investigation some time between late-2013 and 2014.

HUD has a process to detect fraud, but Lee Sparks, the president of the Affordable Housing Association of Certified Public Accountants, said it’s focused on inspecting large and specific items, and scrutiny of nonprofit entities is lacking in comparison to those ran by for-profit entities. Sparks, based in Kaysville, Utah, had no direct connection to Tubman Terrace or the probe.

“We worry about the for-profit guys because they’re motivated to increase their profit. Yet, it’s in the non-profit world where most of this theft occurs,” Sparks said. “When the fraud is embedded in small amounts over time, it is very difficult for HUD to detect these types of issues. HUD counts on the owner and the auditor to be the first line of defense.”

Immich was employed by the board as an office manager and hired as a contracted property manager under his business New York Property Management and Development. About a year and a half ago, he lost authority over Tubman credit cards and bank accounts — which typically a property manager has authority over — due to the federal investigation, but remained as a contracting agent receiving a management fee of 6 percent of the rent collected. Immich also was removed as office manager at that time, but Tubman Terrace officials declined to comment on why he was removed. Roughly a week after Immich was accused of embezzlement, the board gave him and his company a 30-day notice of his termination as property manager.

HUD officials contend there was proper federal oversight over Tubman Terrace, but noted in hindsight that Tubman board members should have paid more attention to the audits’ earlier findings. The board contends there was proper oversight on the board's part, but have not elaborated on what internal controls were in place to prevent financial malfeasance.

The audit spanning Nov. 1, 2013 to Oct. 31, 2014 offers the first notation of the board receiving notification of an investigation by the HUD Office of Inspector General.

HUD spokesman Charles McNally said Tubman Terrace's late payments to its contingency account “seem to have no connection to allegations against” Immich, and added that the delay was due to the entity adjusting to changes in the regulations for the account and the federal investigation.

The 2014 payment wasn’t made until April 30, 2015, according to HUD officials. The 2015 audit shows the board with a liability of $923,890, but HUD officials said the board is up to date on the deposits.

While the federal government requires that excess funds be placed in a residual receipts account in a timely manner, HUD officials said they do not have a specific purpose.

The board first was made aware of the need of the account in 2012, according to the Nov. 1, 2011 to Oct. 31, 2012 audit. HUD notified the board on Aug. 3, 2012 that “any balance in its residual receipts account in excess of $49,750 will be used by HUD to offset (Housing Assistance Payments)," according to the audit. It continued on, stating that the board had a liability of $85,653, however it didn’t note whether the entity had made the payment or not.

“Annual independent audits of Harriet Tubman Terrace required by HUD ensured that all surplus income was deposited into a residual receipts account as required. Contrary to the auditor’s statements, this surplus is not subject to recapture or offset (of Housing Assistance Payments), and therefore does not represent an ongoing liability for the project,” McNally said in a prepared statement. “The balance remains available for capital improvements or operating deficits, provided Tubman Terrace management receives HUD approval. The oversight of Tubman Terrace by multiple HUD offices as well as HUD’s Inspector General have protected the interests of both residents and taxpayers.”

McNally pointed further to a Departmental Enforcement Center letter dated July 25, 2014, which requested additional information for expenses totaling $69,617 as proof of HUD oversight. The center is a division within HUD that focuses on "assuring the highest standards of ethics, management and accountability" for HUD properties.The letter warned board members that should unauthorized distributions continue to occur, HUD may pursue remedies, including cutting the board from federal program participation.

Typically, the onus for proper internal controls being established, maintained and followed falls on the board, Sparks said. Yet, he said nonprofit entities running subsidized housing often lack stringent oversight of their finances.

Sparks said he receives between 10 and 15 calls per year from firms dealing with entities overseeing federally-subsidized housing complexes with financial mismanagement at the helm, many of them nonprofit entities. The association provides guidance and training to about 600 member firms on audits to entities overseeing affordable housing.

“We find they have been very ignorant of internal control,” Sparks said. “They are not devoting the oversight at the board level to take care of these issues.”

The board's attorney, Wise, said issues that were brought up in the audits are "markedly different" and have "nothing to do with the allegations which are currently leveled against Mr. Immich by the U.S. Attorney's Office."

"In no way do I think that any of those audit reports lead to the fair conclusion that the board did not have appropriate oversight of the finances of the facility," Wise continued.

Wise would not elaborate on what internal controls by the board were in place, stating that those specifics are subject to the current litigation. He added that federally subsidized housing of Tubman Terrace's magnitude warrants certain levels of discretion by property managers to pay expenses and "meet the business needs of the operation. That's just true of any property manager who is handling this type of apartment complex."

While HUD may rely on the entity overseeing the property and the auditor to pick up on issues, the federal department does have agreements for each entity that outlines regulations. If its contract with a housing complex is violated, HUD could reduce the federal funds distributed to the project, or even take possession of the property. The definition of a violation varies by contract. While a copy of its contract with Tubman Terrace wasn't immediately available to the Journal, HUD officials have said the complex isn't in jeopardy of losing the contract.

"Extreme measures such as termination of a rental subsidy contract or declaring a development in default of its regulatory agreement are generally only necessary when there is an imminent risk to resident health and safety, or to HUD’s financial interest in a project," McNally, said. "Neither of those conditions appear to be a concern at Harriet Tubman Terrace based on independent audited financial reports and recent physical inspections."

However, HUD’s Office of Multifamily Housing Programs has been cited by the HUD Office of Inspector General — which provides scrutiny of the federal department’s operations — for not always enforcing the requirements of the agreements it has with entities, according to an audit completed by the inspector general’s office in September 2014.

Problems persisted

During Immich’s time as office manager and property manager at Tubman Terrace, audits found that specific payments were grouped together in error, travel expenses were not properly documented and unauthorized distributions were made, according to the financial statements.

From January to September 2012, he allegedly spent $51,172 at retail stores using a Tubman Terrace credit card, including $9,961 at restaurants, $3,597 for airfare and $3,519 in hotels, according to the court papers. From April 30, 2010 to Dec. 31, 2014, more than $300,000 in checks were drawn on the Tubman Terrace bank account "for the personal benefit of Carl Immich," according to court papers. The purchases included $1,808 to the family dentist, $19,214 for phone bills for Immich and others and $425 to horse stables, among others.

While the board acknowledged the deficiencies found in the audits and included general plans to correct, problems persisted.

In the first audit available dated Nov. 1, 2009 to Oct. 31, 2010, the auditor recommended the board review management reports and cancelled checks routinely. However, similar issues were identified in the audit the following year.

Then, between Nov. 1, 2011 and Oct. 31, 2012, an unauthorized distribution of $89,127 was made, so the auditor recommended the board establish procedures so that it’s known what excess funds are available before they’re dispersed. The board responded, saying that calculations of “surplus cash, distributions and residual receipts at midyear and year end prior to surplus cash payments” would be performed.

Despite this, in the Nov. 1, 2013 to Oct. 31, 2014 audit, management again made an unauthorized expenditure of $25,000 for a Tenant Appreciation Day. Management later paid back the money, and the board directed “management to begin taking steps to ensure unauthorized distributions do not occur in the future.”

Outside of summary data broken out by general categories for “high level” expenditures, it’s unclear if the board received monthly financial reports from Immich or even reviewed cancelled checks on a regular basis as was suggested in an audit.

Since Immich’s removal as an employee, oversight of expenditures go through the treasurer and the vice-president of the board.

The future of how Tubman Terrace will operate and whether more scrutiny and oversight will come from the issues the subsidized housing complex currently is facing remains to be seen.

In early March, Associa New York, a property management company with offices in the City of Poughkeepsie and New Windsor, was selected by the board to oversee the duties of property manager until a long-term property management agency is selected. The board's attorney, Wise, said it has yet to make a permanent selection.

The president of the Affordable Housing Association of Certified Public Accountants said a larger firm with more experience overseeing federally-subsidized housing might have helped Tubman Terrace avoid those problems in the first place.

“These guys would have been much, much wiser to hire a professional management company to pay the fees,” Sparks said.